Vietnam to keep outperforming region: Fitch Solutions

According to Fitch Solutions, Vietnam’s economy was buoyed by the export-oriented manufacturing sector, which benefitted from strong FDI and global growth.

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NDO/VNA – Vietnam’s economy expanded by 7.1% in 2018, but its increasing openness and reliance on foreign investment suggest it is unlikely to be spared from the global growth slowdown arising from rising trade protectionism and tighter financial conditions.

This conclusion was included in the economic analysis released recently by Fitch Solutions Macro Research.

According to Fitch, Vietnam’s real GDP grew by 7.3% year-on-year in the fourth quarter of 2018, up from 6.8% in the third quarter. This brought full-year growth for 2018 to 7.1%, marking the fastest pace of expansion in 11 years.

Fitch Solutions said the economy was buoyed by the export-oriented manufacturing sector, which benefitted from strong FDI and global growth.

“Although we believe that Vietnam’s manufacturing sector and economy will continue to outperform the region over the coming quarters, growth is likely to face headwinds stemming from rising global trade disruptions and tightening financial conditions, which will negatively impact global economic growth and risk sentiment,” Fitch noted in the report.

The report predicted Vietnam’s real GDP growth will rise to 6.5% in 2019, in line with the wider trend of slowing global growth.

Vietnam’s high and growing degree of economic openness will likely see the slowing of global growth momentum act as a drag on the country’s export performance in 2019, following export growth of 13.8% in 2018. Exports accounted for approximately 103% of GDP in 2018, up from just around 84% in 2013.

The research firm also expected the manufacturing sector to remain a key economic driver and to outperform the region. Vietnam has grown to become a manufacturing powerhouse – particularly in electronics – due to its relatively cheap and large labour force, geographical advantages, attractive tax breaks, stable political environment and open-door trade policies.